Last year, the Public Employees’ Retirement System board delivered an ugly list of fixes for the state’s ailing retirement fund. The list includes a $365 million budget request from the legislature to help balance investment as well as the formation of a new “Tier 5” designation for incoming state, county, and city employees that denies them a Cost-of-Living Adjustment (COLA) increase. Legislators are also considering the board’s reluctant recommendation of a possible 2% contribution rate increase on employers, which would likely be passed down to current and future employees—with the possibly of additional increases likely.
At issue, say pundits, is the solubility of the fund if every state, county, and city employee paying into it suddenly decides to retire. While mostly in good standing and reporting fair investment returns, the retirement fund wouldn’t survive the “instant retirement” hypothetical, which has legislators and PERS employees nervous.
Every option on legislators’ desks is catching the attention of a high percentage of state residents, 10% of which are government employees who pay into PERS.
"[New govt. employees] have got a reduced benefit. And some might argue they got no benefit.” –PERS board member Randy McCoy
The proposed 2% contribution hike, however seemingly small, has Hattiesburg Mayor Toby Barker fretting his city will need to find nearly $3 million to fund its employees, which could lead to tax hikes or service cuts in his municipality and others.
Barring COLA adjustments for new hires, however, relegates new employees to “junk” plans that could discourage new employees from applying for desperately needed fire and police services positions.
“Retirement is one of the big draws of public service,” said attorney and politico Brandon Jones, speaking at a March 22 Mississippi Public Broadcasting @ISSUE roundtable discussion. “I think this is dangerous for members of the legislature. If you talk to them right now, there’s not a single one of them that’s not getting hammered (by calls)".
At its August meeting, board member Randy McCoy warned the non-COLA new tier would essentially reduce new hires to second-class status. “… [T]hey’ve got a reduced benefit. And some might argue they got no benefit.” McCoy added the new tier, coupled with a 2% contribution hike on employers, could open a “Pandora’s Box” by pushing PERS participants to invest their retirement elsewhere, which could hollow out the weakened fund.
Much of the financial pain haunting conservative leadership this session is their own doing, however. Small-government enthusiasts in charge of the state have engaged in a privatization frenzy over the years, targeting everything from call centers to child support collections. In 2016, Ridgeland company Young Williams proudly announced a contract to serve more than a quarter of a million child support cases throughout the state. They “committed to hire all public employees who currently staff these offices at or above their current wages,” but they made no mention of employees and contract workers contributing to PERS.
The state has similarly lost more than 5,000 total active PERS members just since 2020, dropping from about 150,000 PERS contributors in 2020, to about 145,000 contributors in 2022. Both of those years represent an even more steep drop from 2014, when the state had 161,000 total active members.
State auditor Shad White argued the state “should continue to ‘right size’ government to eliminate waste,” while confirming the total number of state employees had plunged “over the last 15 years—and even more noticeably in the last seven years.”
Now faced with a “Jigsaw’s Choice” of bad options, the Mississippi legislature has yet to adopt any PERS board recommendations and is instead working to overhaul the board. House Bill 1590, if passed, would remove the board’s democratically-elected majority and replace it with an 11-member board consisting of the state treasurer, the commissioner of revenue, four governor appointees, three Lt. governor appointees, one elected representative of a municipality, a representative of the firemen's/policemen's disability and relief funds (and the Mississippi Highway Safety Patrol Retirement System), and one retired PERS member.
The bill also prevents the PERS board from passing its 2% proposed increase—or any increase, for that matter—to shore up the fund.
The board issued a statement opposing the “politicization” of PERS, complaining that “most of the new trustees would be appointed by politicians rather than elected by the membership,” and that any board revision serving the state’s population “should be done openly and transparently, free from insinuation that the fund has been mismanaged.”
“This change would indirectly shift more power to politicians, in effect turning control over to the Governor and Lieutenant Governor, especially since all appointments would be with advice and consent of the Senate,” the board wrote.
Republican operative Austin Barbour claimed the Republican-dominated legislature merely wants “to put … more experts in the (investment) field on that board,” while Jones said House and Senate Republicans are hoping to use a board of political allies to provide cover for decisions that will inevitably anger much of the state.
“(The legislature) could adjust benefits right now if they wanted to,” said Jones. “It doesn’t have to listen to a board at all, but I think they want a board to come in and tell them what they want to hear so they can use that to adjust benefits. That’s the only thing that makes any sense.”
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